Written by Duncan Miriri | From Reuters

Kenyan entrepreneur Ayisi Makatiani scrapped his first effort to launch a private equity fund 10 years ago because his pitch to invest in Africa couldn’t raise enough cash to make it work.

Fast forward a decade and he is now managing partner of Fanisi Capital, a $50 million fund that has investments across east Africa in agri-business, healthcare, retail and education. A second $100 million fund is on the way.

“The returns in Europe and the rest of the world have been low so the only place where you get good risk-adjusted returns is Africa,” U.S.-educated Makatiani, 47, said from a swanky office block on Nairobi’s upmarket Riverside Drive, where other new financial ventures have set up a regional base.

Their expansion marks a turnaround in attitudes to Africa, but masks many of the emerging challenges for both new and more experienced private equity firms on the continent.

Private equity is still a relatively new financial vehicle on Africa’s landscape and challenges include offering enough added value to encourage family firms to open up to external financing, finding local managers with the skills to see a project from investment to exit and winning over African pension funds and other local funding sources to create a more indigenous industry.

“If it is only the money you need, there are other places you can get that,” said Michael Turner, Kenya managing director for emerging markets specialist Actis Capital. “Private equity is about value added.”

Read more at Reuters